We are delighted to present our new Monthly publications, formerly known as Data Review, which will share our short-term forecasts. Please note that users licensed for the data service can access our Japanese gas balances and energy imports data.
In the run-up to the heating season, Japan has been stocking up on LNG to make sure it has enough in its tanks to get through the winter. This was reflected in September’s LNG imports, which grew y/y for the second straight month, by 0.45 Mt (8%) y/y to 6.3 Mt. Preliminary Kpler data put October LNG imports at 6.5 Mt (+0.36 Mt y/y), which would be consistent with a 0.8 Mt stockbuild, given prevailing gas demand headwinds. As such, we have revised our forecast for Q4 18 LNG imports—we now see a 0.34 Mt y/y drop, vs our previous view of a 0.5 Mt y/y fall. We continue to assume lower heating demand y/y on a reversion to normal weather and higher nuclear power generation.
We estimate a Japanese stockbuild of 0.8 Mt in September and another similar build in October, leaving stocks at 3.9 Mt for the start of heating demand. Seasonal forecasts suggest that over November–January, Japan will see warmer-than-normal temperatures. October so far has been mild, and the forecasts for the rest of the month suggest full-month HDDs will be down by 36% y/y, while demand will also likely be eased by the late-month restart of the Ikata 3 nuclear plant. Heating demand, particularly that driven by electric appliances, will continue to be important in determining LNG sendout. The dearth of clear data on Japan’s sector-by-sector gas consumption makes it difficult to paint a full picture, but we think that LNG storage volumes at the start of October were at an implied 2.6–2.8 Mt, having had an injection of some 0.8 Mt in September.
October and November end-user gas demand is likely to be considerably weaker y/y. The scheduled restart of Sikoku’s 890 MW Ikata 3 reactor on 27 October, following a court injunction which suspended plant operations since December 2017, will help limit power sector gas demand through the winter. This is in addition to the 4.7 GW of other nuclear power plants that returned to service earlier this year and will continue to weigh on Japan’s call on LNG. Res-com demand should also soften, with a forecast return to more normal weather suggesting that end-user demand should fall in each month of Q4 18. With power sector gas demand coming off by around 0.5 Mt/m, our upward revision to our LNG import forecasts is largely due to an expected sustained restocking through these two months. For Q1 19, a return to normal temperatures and a move to stock draws would lead to a bigger y/y reduction in LNG imports, with those coming off by some 1.7 Mt y/y.